The People Side of Consulting
BY TOM RODENHAUSER
Consulting attracts intellectual individuals, and those individuals collectively form the core product of a management consultancy. Packaging the knowledge and skills of its people, and delivering these skills through services and solutions, creates differentiation for a consulting firm.
The people side of the consulting business can’t be
under-emphasized. As evidence of this priority, we have
found that the vetting process of candidates at many
firms, particularly mid-sized, can average 45 hours of interviews per hire. This time investment is necessary since
proper selection leads to very low turnover and avoids the
costly measures of retaining or replacing talent.
With all the emphasis on talent selection and human
capital as a means of creating such levels of differentiation, it is surprising that the methods used by consultancies
to manage these resources are relatively staid by comparison. In fact, this phenomenon reinforces the fact that while
consultants are expert in advising clients on best practices,
they often face difficulties with their own operations.
Managing a consulting firm, as one comes to realize,
is significantly different than being a consultant. Often
the management challenge can be rooted in philosophical differences among owners, which manifests itself
in the boot-strap approach of “who does what” with cli-ent-facing partners assuming the roles of internal managers. In other cases, basic delegated operational structures
and decision-making that served a firm well in its early
stages, become unwieldy as consultancies grow.
Not surprisingly, even seemingly minor issues can
have a significant effect on growth and profitability.
Not unlike the companies they serve, managing and
developing a consultancy’s resources becomes more
complicated as the business expands.
Consultancies typically follow a fairly linear path in
terms of growth and maturity. There are various thresh-
olds that firms face—primarily in size—that can prove
difficult to cross. As firms reach certain revenue lev-
els, they face increased complexity in back-office op-
erations, specifically with HR management issues and
structure. Many firms remain mired at levels <$20m
due to their inability to manage rapid growth. Addition-
ally, early-stage growth is characterized by ad hoc HR
management; senior consulting practitioners/partners
typically implement such functions as recruiting and
training with tactical assistance from staff-level per-
sonnel. As firms grow, the underlying HR management
at successful consultancies becomes more structured.
Meanwhile, firms that remain unstructured with its HR
function usually fail in their efforts to scale the business.
Many boutique consultancies struggle as business
scales because the operational demands of running the
firm consume increasing amounts of otherwise billable
time. The consulting industry has a very large population
of smaller firms whose owners fail to relinquish day-to-
day management of back-office operations. Conversely,
partners may recognize the management conundrum,
but opt to address the issues through a hybrid approach
whereby partners still control decision-making while
handing off tactical execution to in-house staff.
While either approach is perfectly reasonable from
the owner/partner perspective, in each case, those
managing the firm face the same challenges as their
clients, namely, what activities should be managed
with internal resources, and what can (and should)
be outsourced for efficiency and profitability? By not
addressing the challenge head-on, firms ultimately
stymie their own growth prospects and potentially
limit the long-term viability of their business.
As evidenced by the growing size gap between global
consulting providers and small boutiques, there is also a
separation with the HR function within those two camps.
The largest consulting firms make sizable investments in
both the people and systems to manage their human cap-
ital assets. Small firms’ historical seat-of-the-pants ap-
proach to HR has evolved to some degree. But it’s obvi-
ous that many consulting firms would benefit greatly with
a commitment to efficient and effective HR management.
Tom Rodenhauser is Vice President of ALM Intelligence. He has
spent more than 20 years advising leading management and IT
consulting firms on strategic growth, talent management, and
market positioning initiatives.
